May 16, 2024

The Three Pillars of the Energy Transition

PJM Regulatory Review

  • The proposed solutions and enhancements coming from PJM’s power/gas market coordination efforts will be brought before the PJM Markets and Reliability Committee towards the end of May. If it is well-received a vote by stakeholders would be scheduled for June 27.
  • PJM expressed confidence that it has sufficient reserves to cover the expected 151,000 MW summer peak for the 2024 air-conditioning season. They were more sanguine about future demand growth and stated that “subsequent years may be more challenging” without additional dispatchable resource deployment.
  • The New Jersey Board of Public Utilities came out with its fourth offshore wind solicitation seeking up to 4 GW of capacity which is due by July 10, 2024.

Energy Market Update

  • Subdued global LNG prices, which have stayed at or below $10/MMBtu, have been met with solid demand in South America due to widespread drought conditions and in Asia due to coal-to-gas switching economics.
  • NYMEX prices have now rebounded almost $0.30/MMBtu for the June contract after bottoming near $1.90/MMBtu last week. US production remains at or below 100 BCF/D and early signs of air-conditioning demand picking up in Texas and the southeast.
  • Drilling activity in dry gas-focused basins remains subdued as producers re-allocate capital spending to more liquids-focused areas.
  • Mountain Valley Pipeline’s final costs are expected to come in just under $8 billion, more than double the original estimate. The initial recourse rate came in around $0.97/MMBtu but will end up being closer to $2.0/MMBtu reflecting the doubling of the cost.
  • Winter northeast basis has also been catching a bid lately, particularly up in New England as the Algonquin City-Gate basis for Jan/Feb-2025 has rallied from $6.20/MMBTU to $8.60/MMBtu.
  • The oil price rally has taken a breather as inventory builds increased and demand projections out of China proved disappointing.
  • Tanker traffic through the Panama Canal and the Red Sea continues to be almost non-existent forcing companies to pay much higher overall rates to compensate for the longer trips to deliver cargoes.

Forward Pricing